Ruble Falls With Bonds as Russia Bans Food Imports From U.S., EUVladimir Kuznetsov
The ruble weakened for a sixth day and Russian bonds fell as the government announced a 12-month ban on some food imports from the U.S. and the European Union.
The currency lost 0.1 percent against the dollar to 36.2250 per dollar as of 1:45 p.m. in Moscow, heading for the weakest since March 21. The yield on government bonds maturing February 2027 rose one basis point to a record 9.81 percent.
Russia banned imports of meat, fish, fruit and vegetables and dairy products from the U.S., EU, Norway, Australia and Canada in retaliation for sanctions imposed on its own industries over the Ukraine crisis. In eastern Ukraine, government forces are cracking down on insurgent strongholds while Russia is massing thousands of troops on the border.
“The market is still ruled by geopolitics,” with fundamental factors giving way to “speculative and portofolio flows,” Dmitry Polevoy, chief economist for Russia and the Commonwealth of Independent States at ING Groep NV, said in e-mailed comments. “The ruble is not sold off more heavily as fewer imports are actually good for it.”
The currency traded little changed at 48.465 against the euro and 0.1 percent weaker versus the central bank’s target basket of dollars and euros at 41.7358.
The ban on food may hurt the Russian economy in the long term as previous restrictions on EU meat imports led to a 40 percent drop in volumes since the beginning of the year and an acceleration of meat-price growth, OAO Alfa-Bank analysts Natalia Orlova and Dmitry Dolgin said in an e-mailed note.
“Since meat is as much as 9 percent of the entire CPI basket, we see this as a serious reason behind the high inflation figures this year,” they said.